Is retail immune to EU law?

What a ride! Rarely have mere recommendations been so anticipated. Five years after the European retail action plan, nearly three after the single market strategy, building on five HLG reports, four workshops, three studies, one public consultation, and reflecting on a landmark ECJ ruling, here they are.

François Barry

Consultant

The Commission wants a competitive European retail sector and has formulated best practice guidelines in that regard, on 19 April.

What’s in there?

Some 17 recommendations, sometimes explicit, sometimes less so, for national authorities to facilitate retail establishment – e.g. shorten procedures for retailers to access the market; promote city centre vitality by other means than mere restrictions on the outskirts – and reduce day-to-day operational restrictions – e.g. allow retailers to source products from anywhere in the EU. The Commission also issued a practical guide for public authorities to help small retailers modernise.

The Communication, which addresses barriers that prevail mostly in brick-and-mortar retail, specifically calls for a level playing field between e-commerce and face-to-face retail. However the reasoning behind goes beyond the same old, sometimes empty dispute over whether or not e-commerce constitutes unfair competition. What’s at stake here is a smooth transition to omni-channel business models, driven by new shopping behaviour, requiring major restructuring across the retail value chain, and urging for consistency between the rules governing in-store sales and those governing online retail.

What makes retail a strategic sector is also its position in the value chain, so that reducing restrictions is expected to have positive spill-over effects across the single market, in other sectors, in particular upstream in manufacturing.

Why soft law?

And why did it take so long? “The task of regulating the retail sector lies primarily with Member States,” the Commission writes. Retail is a politically charged sector, touching upon sensitive matters like shop opening hours and urban planning.

The most recent example: the Visser judgement. The Court of Justice of the EU confirmed in January that retail is a service under the Services Directive; sub-conclusion of this landmark ruling: municipal zoning plans can prohibit certain retail activities outside city centres, yet only if they are proportional, non-discriminatory, and justified by public interest. This is at odds with quite a few countries’ position, headed by Germany and the Netherlands, which would rather not have to comply with the Directive when carrying out spatial planning.

Which brings us to the second reason why the Commission preferred best practices over a legislation: there is one already. The adoption of the Services Directive in 2006 resulted in certain legal and administrative barriers to retail activities being abolished.

But then, what’s the point?

The Services Directive is not properly implemented in EU countries – and this is certainly what stands out from the Communication, which looks like an implementation handbook more than anything else. Yet the Services Directive has an implementation handbook already, published in 2008.

As such, the best practices on their own have very little chance of tearing down those most restrictive, long-standing barriers on the European retail market, and the Commission knows it. The best practices “could serve as a toolbox helping Member States that received country-specific recommendations (under the European Semester) shape their future retail policies,” the Commission says. Yet again, country-specific recommendations are … recommendations.

What to hope for?

That the Commission is serious about using the best practices “for priority-setting in the framework of the Commission’s enforcement policy in the retail sector.” A ‘retail restrictiveness indicator’, released with the best practices, comparing exemplary and unruly Member States, is even here to help the Commission know where to look first.

No, retail is not immune to EU law; but the breadth of some remaining restrictions, at national, regional and/or local level, raises the question of whether retail is immune to EU law enforcement. The value of the best practices will be subject to whether the Commission has the ambition to challenge (big) Member States on violations of the Service Directive – and the Commission’s agenda in the coming weeks in relation to major pending cases will be a measure of that ambition. If the Commission is not prepared to use the stick, then the best practices carrot will just be garnish.